Advanced financial accounting - Lecture 40
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Advanced Financial Accounting
Lecture40
Question
Balance Sheet
as 31st December 2008
H (Rs)
S (Rs)
1,000
550
Investment in S.
750
Current assets
450
350
Total assets
2,150
900
Share capital
1,200
400
Reserves
700
300
Current liabilities
250
200
2,150
900
Fixed assets
Total liabilities & equities
The Holding Co.(H) acquired 80% share of the Subsidiary Co. (S) on 31 st December 2008 when it’s
reserves were worth Rs. 200 and the fair value of net assets of S were Rs. 300 more tan the book
value.
Required: Prepare the Consolidated Balance Sheet as at 31 st December 2008.
Working1
Holding % = 80%
Monitory % = 20%
Working 2
Preacquisition
Postacquisition
Capital
400
0
Reserves
200
100
Fair value
300
900
0
100
Total
Working 3
Goodwill
Cost of investment in subsidiary Co.
750
Less Fair value of net assets (900 x 80%)
720
30
Working 4
Group Reserves
All reserves of parent Co.
700
Post acquisition of subsidiary Co.(100x80%) 80
780
Working 5
Minority Interest
Owner’s equity of S Co. .
Add Fair value
700
300
1,000
Minority interest = 1,000 x 20% = 200
Working
Preacquisition
Postacquisition
Share capital
400
Reserve
200
100
Required reserve
300
Total
900
100
Holding 80%
Minority 20%
720 80 = 800
180 20 = 200
Solution
Consolidate Balance Sheet
As 31st December 2008
H
Rs.
Fixed Assets (1,000 +550+300)
1,850
Goodwill.
30
Current Assets (400 + 350)
750
Total Assets
2,630
Owner’s Equity
Share Capital 1,200
Reserves 780
Minority Interest 200
2,180
Current Liabilities
450
2,630
Question
Balance Sheet
as 31st December 2008
H (Rs)
S (Rs)
1,000
550
Investment in S.
750
Current assets
450
350
Total assets
2,150
900
Share capital
1,200
400
Reserves
700
300
Current liabilities
250
200
2,150
900
Fixed assets
Total liabilities & equities
The Holding Co.(H) acquired 80% share of the Subsidiary Co. (S) on 31 st December 2008 when it’s
reserves were worth Rs. 200 and the fair value of net assets of S were Rs. 300 more tan the book
value. The revaluation of assets of S were subject to application of Rs. 45 and goodwill impaired by
Rs. 6.
Required: Prepare the Consolidated Balance Sheet as at 31 st December 2008.
Working1
Holding % = 80%
Monitory % = 20%
Working 2
Preacquisition
Postacquisition
Capital
400
0
Reserves
200
100
Fair value
300
900
0
100
Total
Working 3
Goodwill
Cost of investment in subsidiary Co.
750
Less Fair value of net assets (900 x 80%)
720
30
Less Impaired
6
24
Working 4
Group Reserves 780
Less Impaired
Less Depreciation
6
36
738
Working 5
Minority Interest
Owner’s equity of S Co. .
Add Fair value
Less Depreciation
700
300
(45)
955
Minority interest = 955 x 20% = 191
Working 5
Minority Interest
Owner’s equity of S Co. .
Add Fair value
700
300
1,000
Less Depreciation
9
191
Working
45
Group
Reserve
Minority
Interest
45 x 80% = 36
45 x 20% = 4
Solution
Consolidate Balance Sheet
As 31st December 2008
H
Rs.
Fixed Assets (1,000 +550+30045)
1,805
Goodwill.
24
Current Assets (400 + 350)
750
Total Assets
2,579
Owner’s Equity
Share Capital 1,200
Reserves 738
Minority Interest 191
2,129
Current Liabilities (250+200)
450
2,579
